Cost reduction continues to be a major objective for procurement organizations, with their primary levers largely remaining the same: optimizing spend, streamlining operations and conducting effective negotiations. However, this doesn’t mean the industry is failing to evolve, as innovation today is driven by digital transformation through data and analytics.
We recently spoke with Terry Young, head of sourcing excellence strategy and workforce at Bristol Myers Squibb, who established a sourcing excellence analytics program. He designed the program to introduce objective metrics that could guide decision-making and track progression toward holistic organizational goals. We discussed the challenges faced in developing analytics capabilities and his journey to help empower procurement to make data-driven sourcing decisions.
ZS: What are the most compelling reasons for an organization to consider developing a sourcing excellence analytics program?
Terry Young: We developed the sourcing excellence analytics program to address the friction within sourcing, mobilize the organization and meet business goals. Procurement tends to be a transaction-based business where success or failure is dependent on a host of factors, including business outcomes, supplier relationships, effective category execution and efficient sourcing operations. Maintaining high quality, optimal turnaround times and a positive user experience are critical to procurement stakeholders. Quality and turnaround time can be greatly affected by the sourcing function, which is effectively the engine of procurement. Without standard measures and ways of operating, procurement becomes highly transactional and cannot provide differentiating value-based services to the business. This could lead to a lack of procurement responsiveness to business challenges and misaligned category strategies.
ZS: I’ve heard you say sourcing excellence analytics programs should have three key objectives. What are they?
TY: The first is to drive operational efficiency and excellence. Humans are creative and strive toward finding the easiest path through a problem, but this approach doesn’t always guarantee success. Speed doesn’t necessarily equate to positive business outcomes. You must constantly monitor your processes to ensure you are getting the outcomes you expect. To paraphrase a quote from former IBM CEO Louis V. Gerstner, Jr.: “People will do what is inspected, not expected.” Metrics are merely a tool in the toolbox for change management and to encourage people to behave in a certain way. That’s why objective metrics and analytics are essential for teams to operate effectively.
The second is to ensure adherence to the governance model. Operational scalability and efficiency depend on process standardization: “Design and develop once, execute multiple times.” The key to sustainable execution is governance, as we must proactively observe and sound the alarm when there are instances of noncompliance or deviations from standard procedures. Routinely reviewing performance analytics on several different levels in the organization can expose issues and provide a forum to proactively address them.
The third key objective in our sourcing excellence analytics program is to develop an analytical mindset. As procurement functions tend to look backward, they focus on transactional and relationship-driven business questions like:
- Which contract governs this supplier?
- How many points of sale or scopes of work does this supplier have open?
- How has this supplier performed in the past?
- Do we have a good relationship with this supplier?
Unlike its engineering and scientific counterparts—including R&D, supply chain and manufacturing—procurement tends not to invest enough in governance, controls and planning systems. Robust and properly structured metrics and analytics teams can be the ultimate mediator between these tendencies, as they can educate procurement leaders on the consequences of their decisions. They can also foster a planning mindset through analytical disciplines by focusing on proactive functions like forecasting, rather than looking backward.
ZS: How did the sourcing excellence analytics team positively affect the company?
TY: When we started developing a sourcing excellence analytics program two years ago, there were no dashboards or standard performance metrics. Basic questions—How many open projects do we have? How many projects do we have in a year? How long does a sourcing project take?—were almost impossible to answer accurately. There were several separately managed processes to track sourcing projects across the organization, each with their own spreadsheets using different data sets to produce management reports. Often these reports conflicted with one another and included key performance indicators (KPIs) with varying definitions.
Our sourcing excellence analytics program allowed us to uncover and resolve these issues, while also putting operating standards—like one common intake process—and management sourcing metrics in place. Some achievements brought about by the new analytics program included:
Define success through objective metrics. Everyone wants to be successful, but it’s difficult when success is not defined. In this type of environment, success is often resolved through argumentative debates. Thankfully, numbers don’t lie. Using metrics greatly reduces the possibility of disputes around procurement performance. This is why it’s critical to define success criteria and performance measurements in advance. While some people do try to avoid accountability and might perceive this as an intrusion, leaders who welcome accountability will appreciate the objectiveness of a clear goal and performance criteria. Creating a sustainable process involves rewarding the latter while discouraging the former.
Democratize access to KPIs. While injecting metrics into operations can help an organization develop an information-based culture, many organizations make a key mistake: centralizing and controlling information by making one person or one team responsible for all the information. Asking one team to oversee the performance metrics that are used to govern the rest of the organization doesn’t work and, in this model, metrics become an afterthought and aren’t considered during process execution. This latency becomes a major inhibitor to adoption and ownership.
Instead, a better approach is to democratize your data. We recommend placing the responsibility for metrics as close to the effected users and process as possible. Consider the example of a speedometer in a car—it’s better for a driver to be able to look at the speedometer while driving, rather than not being able to see their speed until after the trip. The same principles apply to procurement metrics, as a sourcing professional should be able to see the cycle time, quality and workflow metrics of their projects in real time. We should aspire for a future where the user is capable of independently developing, evaluating, improving and accessing metrics.
Build robust change management. It is important to adapt fast when business contexts change. It may seem counterintuitive, but strong adherence to operating standards is the best way to assure agility. If everyone is abiding by the same rules and system, changes are fluidly absorbed. In an environment where there are few standards, aligning and rationalizing disparate processes takes time—but people tend to underestimate the rework, delays and time lost with escalations in systems that are not well governed. As with any effective, complex environment, it’s vital to have access to metrics as part of a holistic management system, inclusive of standard ways of operating.
Drive effective collaboration. For my team, the most noteworthy change after common performance metrics were implemented was the visibility of the sourcing book of work. Not only could management view it, but so could business partners, relationship managers and teams trying to improve the overall procurement performance. Objective performance and status reporting—both good and bad—feeds the organization with the information needed to mobilize teams to pursue success and business outcomes, learn what works and what doesn’t and develop corrective action plans, if required.
ZS: How did you go about changing the organization’s mindset toward data-driven decision-making?
TY: Shifting an organization’s mindset is never easy and we still have a long way to go. Meaningful changes can only be brought about if we ask the right questions: How are we trying to improve our performance as an organization? What information is needed to do it? How do we know we are meeting business objectives?
Without metrics, an organization cannot determine if business objectives are being met. For Bristol Myers Squibb, it was an objective leadership dialogue that eventually opened the door to a procurement-wide analytics program. Prior to this program being established, procurement management information was conflicted and perceptions were shaped by emotion-driven arguments. Opinions were the currency of progress, and the most passionate arguments carried the greatest weight. Whether sourcing projects were late or on time depended on the user’s perspective that day, and not surprisingly, this inconsistency did not lend itself to making rapid and sustainable adjustments to business needs.
Procurement leaders at Bristol Myers Squibb needed a mechanism to increase accountability while ensuring that decisions to optimize operations were yielding the anticipated results—and this is almost impossible without metrics that track progress. Once management was aligned on this approach, the rest of the organization followed suit. Because changes of this magnitude are often driven from the top down, the three pillars of shifting this mindset change were:
Develop an analytics-driven culture. We recommend rewarding teams who make decisions and business cases based on metrics and information. This is best facilitated if it’s incorporated into regular operations like weekly performance reviews, monthly business reviews and supplier performance reviews.
Foster cooperation versus competition. The proper use of information allows an organization to move away from a culture of competitiveness. In a cooperative environment, teams can provide neutral insights based on available information and business outcomes, enabling data and metrics to become the common language between teams so they can better collaborate as an organization.
Democratize information: If you’re in a culture where information is only shared within a privileged circle, it’s important to move to one where teams across the organization are empowered with easy access to authoritative information. This can be achieved through accessible online dashboards, performance analytics and metric portfolios.
ZS: Where do you see your sourcing excellence analytics program in the next five years?
TY: Our sourcing excellence analytics program should move from descriptive analytics to prescriptive forecasting systems within the next year. And in the next two years we want to evolve our technology and culture to focus on two prescriptive capabilities. The first is integrating our technology, which is critical to procurement operations because we have more work than our workforce could reasonably manage. Integrating data flows through our application decreases errors caused by manual reconciliation, introduces workforce efficiencies and speeds up processing time.
The second perspective capability we’ll focus on is moving to an information-centric culture that de-emphasizes the command-and-control system needed to perform in an ambiguous environment. Instead, we want to implement a federated governance model driven by high integrity data. A system that enables the entire organization to use the same metrics allows operators to work more independently and effectively, which truly empowers the organization. Decisions can be made faster because they don’t need to go up and down the chain of command.
ZS: I think for any critical business function, if your intention is to best leverage the skills of your people, technical capabilities and scalability of standard processes, you need to consider how to better use your information. Terry, you’ve done an excellent job highlighting how critical and objective decision-making based on information is the most effective way to navigate increasing business complexities.
We greatly appreciate your perspective. Thanks so much for joining us for this conversation.
TY: Thank you for having me!
Terry Young is the head of sourcing excellence strategy and workforce at Bristol Myers Squibb. His team collaborates with the Procurement Business Insights & Analytics (BI&A) team.